Archive for the ‘Reposts’ Category

Why do smart people act in irrational ways? We assume that smart people act in smart ways and foolish people act in foolish ways. However, in reality many smart people act irrationally.

Rom Brafman and Ori Brafman analyze this paradox in their book “Sway: The Irresistible Pull of Irrational Behavior.” They interviewed experts and collected stories from the realms of psychology, economics, sports, politics, aviation, anthropology and corporate management to distill the psychological forces that sway our behavior.The Brafman brothers give strange examples of human behavior. A common sway example is our response to loss. In encountering loss, many people lose their power of logical reasoning. An investor invests money in a stock because he believes the stock will rise. If the stock drops instead, an ordinary investor does not sell but waits until it rises again; however, when they start to fall, they usually continue to do so. The investor continues to lose money, but he cannot sell the stock in order to stop his loss because the loss itself clouds his reasoning. The same is true for gambling.The Brafman brothers claim that the passion for winning is another sway factor. Sometimes winning means losing; however, people still do their best to win. The authors give a funny example of Harvard students. Max Bazerman’s negotiations class at Harvard Business School would do well to hold on to their wallets when he introduces his “twenty-dollar auction.” On the first day of class, Professor Bazerman announces a game that seems innocuous enough. Waving a $20 bill in the air, he offers it up for auction. Everybody is free to bid; there are only two rules. The first is that bids are to be made in $1 increments. The second rule is the winner of the auction, of course, wins the bill. However, the runner-up must still honor his or her bid, while receiving nothing in return. In other words, this is a situation where second best finishes last. Without realizing it, the two students with the highest bids get locked in. Students start with $16 and continue bidding: $21, $22, $23, $50, $100, up to a record $204. Over the years that Bazerman has conducted the experiment, he has never lost a penny. Regardless of who the bidders have been — college students or business executives attending a seminar — they are always swayed.

Another sway factor is money incentives. It is believed that money incentives always motivate people; however, this is not always the case. In one experiment students are paid for each question they answered correctly in an examination. A control group is not paid but is told that the examination is for academic research. Surprisingly, the group that does not get paid performs better.

One of the most interesting sway factors is labeling. Even one of the finest violin players, Joshua Bell, cannot be a center of attraction without labeling. On a January morning in 2007, the Washington, D.C., L’Enfant Plaza subway station was about to be filled with incredible music. At exactly 7:51 a.m., during rush hour, an ordinary-looking man dressed in jeans and wearing a baseball cap nonchalantly took out his $3.5 million Stradivarius violin and got ready to play. The man was Joshua Bell, one of the finest violinists alive, who regularly performs in the best concert halls to sold-out crowds. For the 43 minutes of the concert, 1,097 people walked by but hardly anyone stopped. One man listened for a few minutes, a couple of kids stared, one woman and that was all. The value attribution of people is based on labeling, not facts. Sway is a good start for examining our decision process.

The article tells everything… ^^

NOTE: This is not my original article. It’s just a repost from Turkey’s leading English-language newspaper, Today’s Zaman.